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Rostelecom Shares Drop on Reports CEO Is Investigated

OAO Rostelecom, Russia’s state-run telephone operator, fell the most in more than a week after Interfax reported investigators searched a house belonging to the company’s chief executive officer.

Prosecutors searched the country home of Alexander Provotorov, who previously headed Moscow-based fund Marshall Capital, Interfax reported, citing unidentified law enforcement officials. A house belonging to Konstantin Malofeev, founder of Marshall Capital, which holds about 10 percent of state-run Rostelecom, was also searched, according to the news service.

Rostelecom fell as much as 4.5 percent and closed down 2.1 percent at 120.38 rubles in Moscow, the biggest drop since Nov. 8 and valuing the company at about $11.3 billion (354 billion rubles). Rostelecom canceled a briefing Provotorov planned to give to reporters after the company releases third-quarter earnings tomorrow.

The Interior Ministry said it’s probing allegations of embezzlement but that its investigation “isn’t directed against Rostelecom.” The case involves “certain individuals who allegedly were privy to embezzlement of a loan by one of the banks,” the ministry said in a statement on its website, without elaborating.

The Vedomosti newspaper reported in its online edition today that state-run VTB Group, the country’s second-largest lender, is seeking repayment of about $200 million for loans which ended up going to companies linked to Malofeev. Malofeev was questioned as a witness in this criminal case and wasn’t detained, Marshall Capital said today by e-mail.

Prime Minister Dmitry Medvedev’s government has sought to replace Provotorov with Vadim Semenov, a classmate of Medvedev who is currently head of state telecoms holding Svyazinvest, Rostelecom’s parent company, the Kommersant newspaper reported last month, citing Communication Ministry documents.

The press service of VTB and Rostelecom spokeswoman Kira Kiryukhina declined to comment.

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